Highlights of economic review by prime minister’s council
By IANSMonday, February 21, 2011
NEW DELHI - Highlights of the latest review by the Prime Minister’s Economic Advisory Council headed by former Reserve Bank governor C. Rangarajan, barely a week ahead of the presentation of the federal budget:
-Economy expected to grow at 8.6 percent in 2010-11 and 9 percent next fiscal
-Agriculture expected to grow at 5.4 percent in 2010-11 and 3 percent next fiscal
-Industry expected to grow at 8.1 percent in 2010-11 and 9.2 percent next fiscal
-Services expected to grow at 9.6 percent in 2010-11 and 10.3 percent in 2011-12
-Slow recovery in global economic and financial situation
-Rising domestic savings and investment chief engines of growth
-Investment rate expected to be 37.0 percent in 2010-11 and 37.5 percent next fiscal
-Domestic savings to be over 34 percent in 2010-11 and 34.7 percent next fiscal
-Current account deficit pegged at 3.0 percent of GDP in 2010-11 and 2.8 next fiscal
-Trade deficit pegged at $132.0 billion in 2010-11 and $151.5 billion next fiscal
-Invisibles trade surplus projected at $81.3 billion in 2010-11 and $95.7 billion next fiscal
-Capital flows can be readily absorbed by needs of high growing economy
-Capital inflows projected at $64.6 billion for 2010-11 and $76.0 billion next fiscal
-Accretion to reserves pegged at $12.1 billion in 2010-11 and $20.2 billion next fiscal
-Inflation rate projected at 7 percent by March 2011
-The declining trend in food prices will result in lower food inflation
-Manufactured goods inflation has remained low
-Care has to be taken to ensure manufactured goods inflation remains below 5 percent
-Monetary policy exit stimulus and look at fiscal tightening
-Current year fiscal adjustment may not be a problem
-Fiscal deficit outcome for 2010-11 could be marginally better than budget estimates
-Consolidated fiscal deficit is likely to be 7.5-8 percent of GDP for 2010-11
-Considerable urgency in the implementation of goods and services tax
-Budgeted level of fiscal deficit and revenue deficit beyond comfort zone
-To sustain 9 percent growth, steps required are:
a) Contain inflation by policies and supply side management
b) Step up pace of infrastructure creation
c) Continue efforts to contain current account deficit
d) Pay greater attention to agriculture
